- The first three quarters of 2024 saw revenue up 5% year over year to EUR 2 billion.
- The performance program was well ahead of budget, with EBITDA up +20.3 percent to EUR 263.7 million and free cash flow of EUR 191.8 million (compared to minus EUR 138.2 million in the first three quarters of 2023).
- External costs, such as raw materials, energy, and logistics, continue to be difficult.
- Lenzing confirms EBITDA guidance for 2024
Lenzing – In the first three quarters of 2024, the Lenzing Group, a major provider of regenerated cellulosic fibers for the textile and nonwovens industries, kept improving its business performance bit by bit. In contrast, the markets that were important to Lenzing recovered slowly. Fiber prices stayed low during the reporting period, despite a sustained increase in fiber sales volumes. The cost of electricity and raw materials remained high, and logistical expenses increased dramatically as well.
In the first three quarters of 2024, revenue increased by 5% year over year to EUR 2 billion. The main driver of this growth is higher fiber revenue (+10.9 percent).
The performance program’s beneficial benefits were the primary determinants of the operating earnings trend. In the first three quarters of 2024, earnings before interest, tax, depreciation, and amortization (EBITDA) increased by 20.3% year over year to EUR 263.7 million. From 11.7 percent to 13.5 percent, the EBITDA margin grew. The EBIT margin was 2 percent, up from 0.6 percent in the first three quarters of 2023, and the operating result (EBIT) was EUR 38.3 million, up from – EUR 10.5 million in the first three quarters of 2023. EBT (earnings before tax) was down EUR 33.4 million, down from EUR 86.9 million in the first three quarters of 2023.
The Lenzing Group’s CEO, Rohit Aggarwal, states that the company is “continuing its recovery course.” “We are concentrating on bolstering our international sales efforts while maintaining stringent cost control. At the same time, we are reinforcing the Lenzing Group’s position as a leading integrated fiber group by adjusting our organizational structure to the altered market conditions.
Due to a tax effect, the net loss after tax dropped to negative EUR 111.1 million from minus EUR 96.7 million in the first three quarters of 2023. Compared to EUR 9.8 million in the first three quarters of 2023, the income tax expense for the first three quarters of 2024 was EUR 77.7 million. This was particularly caused by the group parent company, B&C Holding Österreich GmbH, withdrawing from the Austrian tax group after its participation percentage fell to less than 50%. According to the group tax allocation agreement, the Lenzing Group must subsequently pay a tax transfer of EUR 25.8 million to the group parent, which was incurred during the third quarter. The value adjustment of each Group company’s tax assets and currency impacts from the conversion of local currency tax items into the functional currency1 also had an impact on the income tax expense.
Compared to − EUR 4.90 in the first three quarters of 2023, earnings per share came to minus EUR 3.50. In comparison to EUR 61.1 million in the first three quarters of 2023, the reporting period’s substantially improved cash flow from operating activities came to EUR 287 million. With an increase of EUR 191.8 million (from – EUR 138.2 million in the first three quarters of 2023), free cash flow showed a distinctly positive trend.
The Lenzing Group has been cutting expenses since the end of 2022. Building on this, it has created a thorough performance program with the main goal of greatly enhancing long-term crisis resilience and increasing agility in response to market shifts.
According to Nico Reiner, CFO of Lenzing Group, “Our performance program is currently being implemented well ahead of schedule.” Through increased profitability and sustainable cost efficiency, the program’s initiatives seek to increase EBITDA and generate free cash flow. We anticipate cost reductions of over EUR 100 million annually, of which over 50% will take effect immediately starting in current fiscal year.
A lower level of investment activity contributed to the EUR 95.5 million in capital expenditure on intangible assets, property, plant and equipment, and biological assets (CAPEX) in the first three quarters of 2024 as opposed to EUR 199.7 million in the first three quarters of 2023. As of September 30, 2024, liquid assets stood at EUR 851.2 million, up 16.4% from December 31, 2023.
Successful green bond issue
In September, Lenzing declared that the Brazilian joint venture LD Celulose (LDC) had successfully issued a USD 650 million green bond. Institutional investors showed a strong interest in the bond, which has an annual rate of 7.950 percent and matures on January 25, 2032. LDC’s new USD 1 billion finance structure includes a USD 350 million syndicated loan. LDC converted it into independent company finance by repaying the previous financing agreements, which allowed for the building of one of the largest pulp facilities in the world, using the net proceeds from the bond issue, cash from the syndicated loan, and existing cash.
51 percent of the joint venture is owned by Lenzing.
Changes on the Managing and Supervisory Boards
During the 2024 reporting period, Lenzing also disclosed changes to its Managing Board. The CEO position was taken up by Rohit Aggarwal on September 1, 2024. By mutual consent with the Supervisory Board, Stephan Sielaff, the company’s former CEO, departed Lenzing AG at the end of August 2024. With a degree in business administration and a focus on strategy, Rohit Aggarwal has worked in management roles in the chemical and textile industries for many years. Having held global leadership roles in Europe, the USA, and Asia, Rohit Aggarwal has a thorough understanding of how international markets are strategically developed as well as how to assemble successful management teams. Walter Bickel was named Chief Transformation Officer and Managing Board member of Lenzing AG until December 31, 2025, with effect from April 15, 2024.
The following people were elected as new Supervisory Board members by the Extraordinary General Meeting of Lenzing AG on Thursday, October 10, 2024: Markus Fürst (until the AGM passes resolutions relating to the 2028 financial year), Carlos Aníbal de Almeida Junior (until the AGM passes resolutions relating to the 2028 financial year), and Marcelo Feriozzi Bacci (until the Annual General Meeting passes resolutions relating to the 2028 financial year). Consequently, ten members chosen by the AGM once more make up the Supervisory Board of Lenzing AG. Following the most recent AGM, Christian Bruch resigned from his position on the Supervisory Board. Furthermore, Melody Harris-Jensbach and Nicole van der Elst Desai both submitted early resignations from their Supervisory Board positions.
In relation to the majority stake in Lenzing, a long-term collaboration was negotiated by the B&C Group and Suzano S.A., a Brazilian pulp manufacturer. Suzano S.A. had purchased a 15% stake in Lenzing AG from B&C Group as a result of this arrangement. The biggest pulp manufacturer in the world is Suzano S.A. With its headquarters in São Paulo, it recently reported yearly revenue of almost EUR 7 billion.
Outlook
The IMF slightly decreased its 2025 growth prediction to 3.2 percent, but retained its 2024 growth forecast at 3.2 percent. The prognosis is marked by rising impulses toward protectionism and economic isolation, as well as the continuation of abnormally high risks coming from the Chinese real estate market.
Smoldering international conflicts, trade disagreements, and the unpredictable results of US elections make it increasingly difficult to predict future economic development.
In a climate of growing costs, sometimes declining real income, and worries about economic expansion, consumers are delaying needless purchases. This is impeding the consumer clothing market’s recovery, which is crucial for Lenzing.
It is anticipated that the currency environment in Lenzing-relevant locations will continue to be unstable.
For the remainder of the 2024–2025 harvest season, a modest decrease in stock levels and a small price recovery at a persistently low level are anticipated in the cotton market, which sets trends. For the upcoming 2024–2025 harvest season, preliminary cautious projections point to a further increase in stock levels.
Overall, there is very little visibility into earnings.
Despite a consistently challenging market, Lenzing’s revenue and earnings in the first three quarters of 2024 were somewhat higher than anticipated. When it comes to the execution of its performance program, Lenzing is ahead of schedule.
The business anticipates that the actions will have a bigger impact on boosting profits in the upcoming quarters.
The Lenzing Group affirms its forecast of greater EBITDA year over year for the 2024 fiscal year after taking the aforementioned considerations into account.
In terms of structure, Lenzing still expects the demand for eco-friendly fibers to rise in the textile and apparel industries as well as in the fields of medicine and hygiene. Lenzing is therefore in a very good position with its strategy and is promoting both the extension of its market leadership in the sustainability space as well as profitable growth with specialty fibers.